Nigeria is endowed with huge natural resources including such minerals as crude oil. limestone. Sn. natural gas and others ( Anyanwu et al. 1997:3 ) . All these minerals have remained untapped. except crude oil which had dominated Nigeria’s economic system since the 1970s. Today. crude oil is by far the most widely used energy resource universe broad. Its production and distribution. harmonizing to Asimi ( 2005:8 ) . affects the dealingss among states and even the buying power of some single citizens.
The first find of oil in commercial measure in Nigeria was made in 1956. Shell- BP was the chief company set abouting oil geographic expedition and production activities in the state. although there were sporadic geographic expeditions by other companies. prior to that day of the month ( Gidado. 1999:53 ) . Harmonizing to him. Nigerian authorities did non ship on serious oil policies for the state until 1967. The rapid influx of oil gross to the state in the early 1970s. led to the complete forsaking of agribusiness which was Nigeria’s pillar of economic system.
It was observed that since the beginning of oil production in commercial measure. Nigeria has been rated high. the universe over. such that she is declared Africa’s 2nd largest manufacturer after Libya. eighth largest exporter in the universe and the world’s ten percent largest oil militias ( Omotoso. 2010:2 ) . Since Nigeria’s foremost export of rough oil in 1959. it has become the major subscriber to the country’s economic system. and that is why over 80 per centum of the country’s foreign exchange net incomes come from the oil sector.
Nigeria has been basking consistency addition in the gross from oil. For case. a barrel of oil was sold at 3. 00 dollars per barrel in 1971. 12. 42 dollars and 37. 00 dollars a barrel in 1974 and 1980 severally. Following steady additions in the gross revenues. grosss swelled every bit good from 300 million dollars in 1970 to 4. 2 billion dollars by the terminal of 1974. when oil production was 2. 3 million barrels per twenty-four hours ( Asimi. 2005:8 ) . By1976. oil gross had risen to 6. 3 billion naira and in 1980. the extremum of 12 billion naira was achieved ( Nigerian oil Directory. 1993: 53 ) .
Sing the current monetary value of rough oil in the international market. which stands above 70 dollars a barrel. the gross accruing to the state. has every bit increased correspondingly. The immense gross notwithstanding. one may be tempted to inquire. if this God-given trade good has brought expletives alternatively of blessing. since Nigerian people are yet tohave smiling faces right from the origin of oil production and exportation in the state. It has been protests galore against short supply and steady additions in the pump monetary values of refined merchandises.
In order to buffer the effects of these additions and cut down direct load on the people. the federal authorities instituted the policy of subsidy. The kernel of this policy option was to cut down the monetary values of the merchandises. but at the disbursal of the federal authorities that was paying whooping sum of money. For case. the amount of about 2. 5trillion naira was spent on fuel subsidy by the federal authorities between 2006 and 2009. and 600 billion naira budgeted for the financial twelvemonth 2010 ( Movement for Economic Emancipation. ( 2010:10 ) .
But what truly disturbs the heads of many Nigerians is that despite the immense outgo on subsidy. the monetary values of refined merchandises continue To lift endlessly. hence consumers buy them at a rate higher than expected. Ezeagba ( 2005:43 ) . asserts that a state of affairs of subsidy exists. when consumers are assisted by the authorities to pay less than the market monetary values for the merchandise they are devouring. That is why the kernel of the subsidy in the present circumstance in Nigeria. is to cut down the official pump monetary values of crude oil merchandises paid by Nigerian consumers.
It is unfortunate to detect the deteriorating nature of the country’s societal comfortss. critical substructure and other development indices. when millions of naira are believed to hold been spent on subsidy. It is hence. against this background that this paper seeks to analyze deregulating of the downstream oil sector and to determine whether the policy would work out the job of scarceness and ceaseless additions in the monetary values of crude oil merchandises. which to my ain head have caused a batch of instability in the economic system of this state.
Harmonizing to Olayiwola ( 2009 ) . oil operations commenced in Nigeria efficaciously in 1956. A brief historical jaunt indicates that oil geographic expedition started in 1908 in Lagos and Okitipupa coastal countries both in Western Nigeria by the Nigerian Bitumen Company established by a German Consortium. Between 1908 and 1956. assorted geographic expedition and development continued in assorted parts of Nigeria. In 1956. oil was discovered in commercial measure at Oloibiri. present twenty-four hours Bayelsa province ( Ihua. Ajayi & A ; Eloji. 2009 ) ; in the Niger Delta part of Nigeria by Shell D’Arcy.
This development heralded Nigeria’s rank of Organisation of Petroleum Exporting Countries ( OPEC ) in 1971. The geographic expedition of oil and gas is preponderantly concentrated in the Niger Delta where transnational companies and a few of the autochthonal 1s are engaged in production and geographic expedition of oil. The oil industry comprises the upstream. the downstream and service sectors. The upstream sector focuses on excavation. geographic expedition. production and exportation and is dominated by transnational companies ( Ogbeifun. 2009 ) .
Chevron. Shell. Agip. Elf. Texaco. Esso-Mobil interalia belong to the upstream sector. It was argued from different quarters in Nigeria that deregulating of downstream oil sector without equal local supply. will farther worsen importing and virtually seal all hopes of of all time resuscitating the bing refineries. and gainfully using the huge assets therein ( Federal Ministry of Information. 2000:91 ) .
To rectify this state of affairs. authorities had tried to entice private investors to drift refineries and aid to stop the fuel crisis in the state. but so far. no serious private investor had taken up the challenge. But Adeogun ( 2010:43 ) . contended that the quest to pull private investors into the crude oil refinement concern may stay a chase in futility. as no investor would be willing to put in the sector under a monetary value regulated government. This implies that the being of functional refineries is significantly dependent on the debut of effectual deregulating policy.
This was the ground why the Nigerian National Petroleum Corporation ( NNPC ) on behalf of the federal authorities and China State Construction Engineering Corporation ( CSCEC ) . on 31stMay. 2010. signed a Memorandum of Understanding ( MOU ) worth N4. 2 trillion. for the edifice of three new refineries ( Okpole. 2010:9 ) Harmonizing to him. the move is to speed up the birth of refineries and stem the inundation of imported refined fuel presently estimated to be about N1. 5 trillion annually.
Okpole was of the position that the successful edifice of new refineries will no uncertainty reenforce deregulating of the downstream sector of the nation’s crude oil industry. He every bit believed that they ( new refineries ) will add some capacity of 750. 000 barrels per twenty-four hours to Nigeria’s refinement substructure and place NNPC to prosecute productively in the international trading of refined crude oil merchandises It is unfortunate to detect nevertheless. that while the authorities was doing frenetic attempt to decide the fuel crisis in the state. there were villainous groups of persons who have been working strategically against such attempt.
For case. there exist a mob believed to be responsible for the dysfunctional province of the nation’s refineries so as to go on to import finished merchandises at a monetary value determined by them ( Onyekwuere. 2009:19 ) . Harmonizing to him. President Umaru Musa Yar’ Adua in May 2009. attributed the job in the oil sector to the handicraft of factions. It is believed among most Nigerians that. it was corruptness that crippled Nigeria’s refineries. One school of idea was of the position that unless corruptness is wiped out in Nigeria. there is no manner Nigerians will come on as a people.
For case. why will the federal authorities travel to Senegal. a little state that does non hold crude oil sedimentation. to import refined crude oil merchandises? ( Aturu. 2009:20 ) . This has been the handicraft of the group since the state that has been sabotaging the attempts of the authorities. to revive or construct new refineries. The proposal was ever killed by them. for fright of fring their beginning of income. This was because it would set an terminal to their import racket. therefore taking concern off from their outside confederates ( Onyekwere. 2009:23 ) .
Their activities in Nigeria’s oil sector have been doing a batch of concerns in the state and that is why the run for deregulating of the sector should be strongly encouraged. The activities of the economic wrecker notwithstanding. the authorities has continued to keep positive position about the execution of the deregulating policy in the state. The authorities believes that the policy will no uncertainty do the merchandises available and even cheaper.
It contended that deregulating is most needful soon in Nigeria. particularly. this clip when the authorities is happening it really hard to prolong fuel subsidy which has gulped big sum of public money. The authorities believes that through deregulating. the degree of deformations and corruptness bing in oil minutess. will cut down drastically and will offer more benefit to Nigerians. Deregulation of the downstream oil sector will assist to deliver this country’s image which has been battered internationally. due to corruptness.
Has our image non been damaged when Nigeria. the 2nd largest exporter of rough oil in Africa has the drift to import refined crude oil merchandises from a little state like Senegal that does non hold any rough oil? This is the handicraft of the factions in the state. Execution of the policy will convey to an terminal the being of factions that have been sabotaging all schemes of the authorities to regenerate our ailing refineries. The faction is a group of dissenters and economic wrecker. that is out to sabotage the sovereignty of this great state.
The members are known because they occupy strategic places in the personal businesss of this state. For a successful deregulating policy of the downstream oil sector in Nigeria. this group of people must be fished out and prosecuted. This contention is in line with the averment by Hon. Bamidele. the Deputy Chairman. commission on Petroleum Resources. that deregulating of the downstream oil industry would cover a deadly blow on the activities of the faction. who he said had continued to keep the state to redeem.
This is in malice of the fact that the Obasanjo disposal attempted to interrupt their anchors through partial deregulating by giving refineries to private investors in 2003 ( Badmus. 2009:31 ) . For effectual execution of deregulating policy. the authorities should supply enabling environment for its take-off. What happened in Ghana in 2002 when monetary value additions in crude oil merchandises were anticipated should be an eye-opener to Nigeria.
During this period. it took the Ghanese authorities over one twelvemonth to edify her citizens on the approaching monetary value additions. so that when it eventually came. cipher was taken unawares. In order to buffer the expected multiplier effects of such additions. more coachs were injected into the conveyance sector. to minimise the possible addition in the menus. In malice of the fact that Ghana is non an oil exporting state. there was no appreciable additions in the pump monetary values of fuel and conveyance menus in the state. when the oil monetary value started lifting in the international market.
It would non be out of topographic point therefore. if Nigeria should emulate Ghana in this circumstance. by seeking to buffer the possible effects of deregulating before it comes. The importance of this can non be overemphasized. since a rise in the pump monetary values of crude oil merchandises is optimistically anticipated. One of the greatest challenges confronting the downstream crude oil sector in Nigeria is the issue of fuel importing. It is believed that deregulating would turn to this job forthrightly.
With deregulating. subsidy which has been a conduit pipe and beginning of fraud in Nigeria. will be a disregarded issue. Furthermore. competition which is an of import constituent of deregulating policy will promote private sector engagement in constructing new refineries. thereby increasing polishing capacities in Nigeria. We can non go on to import gasoline. when we have the capacity to bring forth what we can devour every bit good as for exportation ( Okere. 2010 ) . In other words. Nigeria has all the where withal. non merely to be autonomous but even plenty to export refined merchandises.